Daily Technical Analysis by Kate Curtis from Trader's Way

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AUDUSD Short-Term and Long-Term Channel (Dec 05, 2017)

AUDUSD is currently trading inside an ascending channel on its daily time frame and is testing support. Price is also moving inside a short-term descending channel and might need to break past the resistance before establishing bullish momentum.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. This suggests that the long-term rally is more likely to continue than to reverse. Stochastic is also pointing up to reflect the presence of buyers.

Gains could take the pair up to the resistance near the .8200 major psychological mark or at least until the mid-channel area of interest at .7950. However, if the short-term channel resistance holds, the pair could make another attempt at breaking below the larger channel's floor at .7560.

Economic data from Australia has been mixed so far, with the current account balance showing a wider deficit of 9.1 billion AUD versus the estimated 8.8 billion AUD shortfall but still an improvement over the earlier 9.7 billion AUD deficit. Retail sales ticked higher at 0.5% versus the projected 0.3% uptick while the previous reading saw an upgrade.

The RBA statement is due next and no changes to the 1.50% interest rate is eyed. However, policymakers could talk about how inflation expectations drifted lower and how a higher AUD might keep price levels in check.

As for the US, political risks are currently pushing the dollar around, particularly with tax reform and the ongoing investigation into Trump's ties with Russia in play. The House and Senate are expected to start discussions on merging their respective tax bill versions this week and more positive developments could buoy the Greenback higher.

By Kate Curtis from Trader's Way

 

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EURAUD Pullback to Broken Support (Dec 06, 2017)

EURAUD recently broke below its ascending channel bottom around 1.5600-1.5650 then hit a low of 1.5500 before pulling up. Applying the Fib tool on the latest swing high and low shows that the 50% level lines up with the broken channel support, which might hold as resistance.

The 100 SMA is crossing below the longer-term 200 SMA so the path of least resistance is to the downside. This suggests that the selloff could resume soon, probably taking price back down to the swing low or lower. Stochastic is also indicating overbought conditions and turning lower could draw more sellers to the mix.

The RBA sounded less dovish than usual in their latest statement, citing that non-mining investment is picking up and that CPI could edge higher. This marked a difference from their earlier jawboning remarks and assessment that inflation could remain low for some time.

However, Australia's Q3 GDP missed estimates and came in at 0.6% versus the projected 0.7% growth figure. The previous period's GDP enjoyed an upgrade from 0.8% to 0.9%, though. The trade balance is still due next and a smaller surplus is eyed.

As for the euro, a few misses in its latest set of medium-tier data weighed on the currency. Retail sales also turned out weaker than expected with a 1.1% slide versus the estimated 0.6% fall. Only German factory orders and the region's retail PMI are due next.

By Kate Curtis from Trader's Way

 

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EURJPY Channel Support (Dec 07, 2017)

EURJPY is still trading inside its shallow descending channel visible on the 4-hour time frame and is making its way back down to support at 131.50. A bounce from this area could take it back up to the resistance around 134.00.

The 100 SMA is crossing above the longer-term 200 SMA to signal that the path of least resistance is to the upside, which suggests that support is more likely to hold than to break. Stochastic is already indicating oversold conditions, so sellers could use a break and let buyers take over.

Medium-tier reports from the euro zone have been upbeat in the latest session, with German factory orders rising by 0.5% instead of posting the projected 0.2% fall and the region's retail PMI improving from 51.1 to 52.4.

The yen has been able to rake in gains as risk aversion extended its stay in the financial markets, mostly owing to geopolitical risk. There were no reports out of Japan yesterday and today has the leading indicators due.

As for the euro zone, German industrial production and French trade balance are lined up, just ahead of the revised GDP release. Stronger than expected data could keep the shared currency afloat but disappointing figures could lead to more losses.

By Kate Curtis from Trader's Way

 

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USDJPY Inverse Head and Shoulders (Dec 08, 2017)

USDJPY could be in for more gains from here as price broke past the neckline of its inverse head and shoulders formation. This is considered a classic reversal signal and spans 200 pips, so the uptrend could last by the same height.

However, the 100 SMA is below the longer-term 200 SMA on the 4-hour time frame so the path of least resistance might still be to the downside. Stochastic is also dipping into overbought territory to signal a potential slowdown in the rally.

The US dollar remained supported by positive NFP expectations, even as another report signaled a potential disappointment. Challenger job cuts rose 35K in November, up 30.1% on a year-over-year basis and 17% from the previous month. Still, initial jobless claims indicated good momentum as claimants dropped to 236K versus 239K. Consumer credit also advanced, signaling financial optimism.

The NFP is expected to show a 198K gain in hiring for November, down from the previous 261K increase. Average hourly earnings could recover by 0.3% after staying flat in the previous month, with positive wage growth likely funneling to upside inflationary pressure later on.

As for the yen, the final GDP reading enjoyed an upgrade from 0.3% to 0.6% versus the 0.4% consensus. The current account balance also beat expectations but average cash earnings disappointed with a 0.6% uptick versus the projected 0.8% rise.

By Kate Curtis from Trader's Way

 

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USDCAD Range Resistance (December11, 2017)

USDCAD is still trading sideways, finding resistance at 1.2900 and bouncing off support at 1.2675 on the latest test. Price is now nearing the top of the range once more and technical indicators are signaling the resistance might hold.

The 100 SMA is below the longer-term 200 SMA, so the path of least resistance is to the downside. This means that the ceiling is more likely to hold than to break. Stochastic is also indicating overbought conditions and is starting to turn lower, reflecting a return in bearish pressure.

However, if an upside breakout occurs, price could head up by around 225 pips or the same height as the range. Similarly, a downside break could lead to a selloff of the same height.

There are plenty of top-tier catalysts lined up from the US economy this week, but the main event is likely the FOMC decision. Although a December hike is priced in, traders are more eager to find out how the pace of tightening might go in 2018. The Fed is slated to release its updated economic projections and this would give clues next year's rate hikes.

The US is also set to release its latest batch of inflation and consumer spending figures. Note that policymakers signaled a weaker inflation outlook a couple of weeks back, and this might be reflected in the PPI and CPI reports.

There's not much in the way of top-tier data from Canada but the Loonie is on weak footing owing to the less hawkish statement from the BOC last week. Oil prices could also influence the positively correlated currency from here.

By Kate Curtis from Trader's Way

 

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GBPJPY Rising Wedge (Dec 12, 2017)

GBPJPY has formed higher highs and higher lows, creating a rising wedge pattern visible on its daily time frame. Price is approaching the peak of the chart pattern, so a breakout could take place sooner or later.

The 100 SMA is above the longer-term 200 SMA on this chart, so the path of least resistance could be to the upside. The short-term moving average is around the bottom of the wedge, adding to its strength as support.

However, stochastic is turning lower from the overbought area to signal a pickup in selling pressure. A breakout in either direction could lead to a move of around 2,500 pips or the same height as the chart pattern.

There are plenty of economic events in the UK this week, including today's CPI release. Headline inflation is slated to hold steady at 3.0% while core CPI could also stay unchanged at 2.7%. Jobs data due on Wednesday could show a smaller increase of 0.4K in claimants and a pickup in the average earnings index, which would also be a positive sign for inflation.

Later on, the BOE will announce its monetary policy decision. No actual changes to interest rates or asset purchases are expected, so traders will pay closer attention to the minutes of the meeting and how policymakers would vote.

As for the yen, the Japanese currency has been mostly reacting to market sentiment and bond yields these days. Rising US bond yields on the heels of a potentially upbeat FOMC statement and tax reform progress are keeping a lid on yen gains.

By Kate Curtis from Trader's Way

 

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GBPAUD Ascending Trend Line (Dec 13, 2017)

GBPAUD continues to trend higher, moving above an ascending trend line connecting the lows since early September. Price looks ready for another trend line test soon and this support area lines up with a former resistance around 1.7500.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. This means that the uptrend is more likely to continue than to reverse. The 200 SMA is just slightly below the trend line, adding another layer of support in the event of a larger dip.

Stochastic is already indicating oversold conditions to show that sellers are exhausted. The oscillator has yet to pull higher to reflect a pickup in bullish pressure that could allow a bounce to happen. A bullish divergence can also be seen as price made higher lows while stochastic had lower lows.

UK data has turned out stronger than expected so far, with headline CPI up from 3.0% to 3.1% instead of holding steady as expected and core CPI steady at 2.7%. PPI was also stronger than expected but RPI and HPI fell short.

Jobs data is due next and a smaller gain of 0.4K claimants is eyed compared to the earlier 1.1K increase. Also, the average earnings index is projected to advance from 2.2% to 2.5% to reflect stronger wage growth and more upside inflationary pressure.

This could set up for an upbeat BOE statement later in the week, even as the central bank is widely expected to keep rates on hold. As for the Aussie, rising gold prices are propping it up but the upcoming jobs report could still pose an event risk. An increase of 18.1K in hiring is eyed, much larger than the earlier 3.7K gain.

By Kate Curtis from Trader's Way

 

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EURUSD Descending Channel (Dec 14, 2017)

EURUSD is trending lower and moving inside a descending channel on its 1-hour time frame. Price is testing resistance after a sharp rally, so either a bounce or break could be due.

The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside, which means that the selloff is likely to continue. The channel resistance also lines up with the 50% retracement level.

Stochastic is indicating overbought conditions and is turning lower, reflecting a return in selling pressure. However, the gap between the moving averages is narrowing to suggest a potential return in bullish momentum. A break past 1.1850 could be enough to signal that a reversal is underway.

The FOMC hiked interest rates by 0.25% as expected but Yellen reiterated her cautious inflation outlook and also warned that the tax cuts could lead to a mere short-term boost rather than a long-term one. Upgrades were seen for most of the growth and jobs figures in this year and the next couple of ones, but inflation estimates were mostly unchanged.

As for the euro, the ECB decision today could prove to be a huge event risk as traders are now waiting for clues on a rate hike. Medium-tier data from the euro zone has been mixed since the last decision but inflation has ticked higher.

US retail sales figures are also lined up today, with the headline figure slated to show a 0.3% gain and the core reading likely to show a much stronger 0.6% increase. Higher than expected consumer spending data could reinforce positive growth expectations and more rate hikes next year.

By Kate Curtis from Trader's Way

 

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GBPUSD Channel Resistance (Dec 15, 2017)

GBPUSD is trending lower and moving inside a descending channel on its 1-hour time frame. Price is currently testing the resistance and could be due for a drop to support soon.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In other words, the selloff is more likely to resume than to reverse. In that case, price could drop to the 1.3300 handle or lower.

Stochastic is still heading north to show that a bit of bullish momentum is present but the oscillator is also nearing overbought levels to signal rally exhaustion. Turning lower could confirm that bearish pressure is returning.

The BOE kept monetary policy unchanged in this week's statement as expected. Policymakers voted unanimously to keep interest rates and asset purchases on hold. The central bank also cited Brexit as a risk to their economic outlook.

As for the dollar, the currency has been able to hold its ground thanks to upbeat data. Headline retail sales rose 0.8% versus the estimated 0.3% gain while the core reading posted a 1.0% jump versus the estimated 0.6% increase.

Only the BOE quarterly bulletin and a speech by MPC member Haldane are lined up from the UK today while the US has industrial production and capacity utilization numbers due. The Empire State manufacturing index is also due today.

By Kate Curtis from Trader's Way

 

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EURGBP Channel Resistance (Dec 18, 2017)

EURGBP has been trending lower on its 1-hour time frame, trading inside a new descending channel pattern. Price is currently testing the resistance and could be due for a drop to support.

The resistance lines up with the 50% Fibonacci retracement level on the latest swing high and low, as well as an area of interest or previous support and resistance. This is also in line with the moving averages.

Speaking of moving averages, the 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. This suggests that the selloff is more likely to resume than to reverse. Stochastic hasn't quite reached overbought conditions yet but is already turning lower to indicate a pickup in selling pressure.

The euro was in a weak spot last week after the ECB refrained from dropping more hawkish hints, despite upgrading their growth forecasts. Prior to this, a few medium-tier reports from its top economies printed weaker than expected results, so bulls might be worrying about a slowdown as well.

Meanwhile, the BOE wasn't as hawkish either, even though top-tier UK data from earlier in the week turned out mostly stronger than expected. The MPC voted unanimously to keep rates and asset purchases on hold for the time being.

Up ahead, final CPI readings from the euro zone are due today, ahead of the German Ifo business climate index tomorrow. UK current account balance is due on Thursday and there are no other major reports so traders could pay closer attention to Brexit updates.

By Kate Curtis from Trader's Way